Asking prices for UK homes next year will be slightly lower than they are now according to the forecast offered by Rightmove, the largest online property website in Britain. The expected 1% decline will be the product of higher interest rates and the continued impact of inflation. This time around last year, the prediction was for prices to fall by 2.0% in 2023. However, the decline in the average asking price for a home is 1.3% lower than last year. The lower asking prices will likely be seen as less than a sign of a weaker economy, but more of a needed correction to the housing market’s pandemic boost.

Homeowners fearing a decline in the housing market that could warn of a fall in property values will be relieved to see less of a gloom and doom forecast for the housing market. Homeowners have been afraid of falling into negative equity should property values decline due to a lack of demand in the market. 

Without a positive equity balance, homeowners are out of reach of a helpful remortgage when their current mortgage term ends, and many will in 2024. Those that secured the then popular two-year fixed rate mortgage will have obtained not the historically low rates of 2021, but still cheap rates in comparison to what exists currently.

A slightly less active housing market is certainly a better outlook than one that would near a housing market crash which had been discussed as a possibility only months ago.

The market has been evolving and while there are not the pandemic lifestyle large area homes in as strong of a demand, new trends are appearing that could have first time buyers and novice investors staying involved. DIY buyers are taking on the properties that others have overlooked and were less likely to grab attention from buyers or landlord investors. It takes only a bit of time spent on social media sites to become inspired by the success of others that have taken neglected and outdated properties and turned them into dream homes. Some have predicted it will be a strong motivating factor that will influence first-time buyer choices next year for those that want to avoid the asking prices of usual starter homes. 

Rightmove reported more home sellers cutting their asking prices. In 2023, sellers cutting asking prices amounted to an increase of 39%, while last year it was 29%, and 34% in 2019. 

Tim Bannister, a property expert with Rightmove, remarked on the future housing market, saying “An average drop of 1% in prices reflects our prediction that it’s likely to be another muted, and in parts, challenging year for some buyers and sellers in 2024.”

Mr. Bannister added, “The better than anticipated activity this year has shown that many buyers are still getting on with satisfying their housing needs, and there is considerable opportunity for sellers and their agents to attract these buyers with the right pricing.”

In another data report on the housing market, Nationwide, UK’s largest building society, offered an optimistic outlook on the market with a 0.2% month on month increase in the average house price. Though the annual comparison was down by 2.0% for November. 

Another positive report came from property website Zoopla, which deemed the housing market conditions a “buyer’s market” and the most favorable it has been for home buyers since 2018 when Brexit was impacting the economy and Covid-19 was not yet a known household word.

There is another meeting of the Bank of Egland’s Monetary Policy Committee (MPC) on 14 December. Due to the recent decline from 6.7% to 4.6% of the inflation rate, there is little expectation of a vote to increase the standard base interest rate from the current 5.25%. There is not an expectation of a cut either as the rate remains over two times higher than the target rate of 2.0% set by the Bank.

The more optimistic outlook for the economy has lenders feeling less risk and the competitive lending environment has quickly taken shape. Some home buyers will find themselves shopping for mortgages in rates below the current base rate of 5.25%. There have also been remortgages reported below the base rate as well. 

However, not all hopeful home buyers will have the Bank of Mum and Dad to assist with a deposit, or have the extra time, ability, or savings to take on a DIY renovation home to get onto the property ladder. The asking prices, though lower, and though forecasted to decline further, will still be out of reach for many first-time buyers. 

December 2023 is the two-year mark of the beginning of the MPC taking action to curb inflation. It was in December 2021 the first of fourteen consecutive MPC meetings occurred in which the majority vote was to increase the base rate. That first vote erased the historically all-time over 300 years old low of 0.1%. The almost zero rate increased by more than double to 0.25%, which is 5% lower than the current rate.